Standards and Regulations 2019 – Providing a Competent Service
We have seen already in the previous two articles (The Maintenance of Trust and Proceedings before Courts and Flexibility and New Ways to Practise) and dealing with the forthcoming Solicitors Regulation Authority (SRA) Standards and Regulations 2019 (referred to here as “the New Regulations”) that one of the new features has been the grouping together of thematically similar provisions into one or two paragraphs. This is no less the case with issues relating to standards of service where Paragraph 3 of the Code of Conduct for Solicitors RELs and RFLs (referred to here as “the Code for Individuals”) and Paragraph 4 of the Code of Conduct for Firms (referred to here as “the Code for Firms”) deal with a range of issues appertaining to service and competence.
Paragraph 3.1 of the Code for Individuals and Paragraph 4.1 of the Code for Firms provides that:
“You only act for clients on instructions from the client, or from someone properly authorised to provide instructions on their behalf. If you have reason to suspect that the instructions do not represent your client’s wishes, you do not act unless you have satisfied yourself that they do. However, in circumstances where you have legal authority to act notwithstanding that it is not possible to obtain or ascertain the instructions of your client, then you are subject to the overriding obligation to protect your client’s best interests.”
Although this looks as if it should be familiar – after all there is nothing that is overtly controversial – nevertheless these paragraphs represents what is essentially a new provision, namely the requirement that you act only on instructions from the client or from someone “properly authorised to provide instructions on their behalf”.
Certainly, there were echoes of this in the SRA Handbook 2011 where for example in Outcome O (1.6) of the SRA Code of Conduct (referred to as “2011 Code”) there is a reference to the need for fee agreements to be “suitable for the client’s needs” and in Indicative Behaviour IB (1.28) which provided that you should not act for a client “when there are reasonable grounds for believing that the instructions are affected by duress or undue influence without satisfying yourself that they represent the client’s wishes”. However, gathering the provisions together in one place and repeating them verbatim in each of the two Codes would rather indicate the importance that the SRA places upon the provisions and the need for firms to ensure that their procedures for taking on new clients do actually address these provisions.
Thus, the requirement now is that, when taking the client’s instructions, you must ensure that:
- They are the instructions of the client;
- If they are not received directly from the client, that the person giving you those instructions is “properly authorised” to do so;
- That where you have suspicions that all is not right, that you don’t simply plough on regardless but take time to investigate those suspicions;
- Where you cannot be sure, but it appears that you do have authority to act, that you continue to be alert to the circumstances and remember that “you are subject to the overriding obligation to protect your client’s best interests.”
Breaking this down further:
- you need to be sure not only that the instructions are coming from the person purporting to be the client but that the client is who they say they are. It is not uncommon for someone to hold themselves out as having the right to take particular steps when they do not or to hold themselves out as being someone whom they are not. Indeed, for example, this is something which has been envisaged and addressed in the Law Society’s Conveyancing Quality Standard (CQS) which provides at 1.4 that firms must:
“have a policy in relation to the avoidance of involvement in property and mortgage fraud, which must include …… (d) a documented procedure for enhanced checking of the identity of the practice’s clients where a high risk of fraud is present”.
- you need to be sure that an authority to act has not been obtained by coercion or threats – and you need to be aware of, for example, the pressure that families can place upon each other where the threat may not be altogether apparent.
- You need to be sure that the client understands the nature of the instructions they are giving you (this is something which will also come into play in relation to Paragraph 3.4 – You consider and take account of your client’s attributes, needs and circumstances).
Clearly ensuring that you are acting only the instructions of the client, or the instructions of someone who has the client’s best interests at heart, is a vitally important part of any retainer. All too often, particularly where vulnerable clients are concerned, third parties can manipulate situations so that the instructions you receive may appear to be those of the client whereas in reality they are for the benefit of someone else. This is a scenario envisaged in the recently published SRA guidance “Representing people who lack mental capacity” which we shall look at shortly. The problem for the solicitor, of course, is that they are often presented only with a snapshot of the circumstances surrounding the instructions. They are joining in only at the point at which the client is (ostensibly) giving the instruction which will bring about a revised state of affairs and have not been privy to any machinations which may have gone on behind the scenes and possibly for a substantial period of time.
Recognising that this is not always possible Paragraph 3.1 does provide a form of “get out of jail free card” in that where there is legal authority to act, but it has not been possible for some reason to take valid instructions, Principle 7 comes into play and the duty to act in the best interests of the client instead applies.
Although implicit in the 2011 Code, these requirements were not stated to apply as such and so should be added as a term to compliance manuals if this is seen as being helpful to support compliance with the SRA’s requirements.
There will be situations where you are not instructed directly by the client, for example where the client is overseas and has appointed an attorney to act on their behalf, where the client lacks the capacity to provide instructions and so has to provide instructions through a third party or where the client simply chooses to be represented by an agent.
Where this is the case, consideration must also be given to the relevant provisions of the Money Laundering Regulations 2017 (“MLR 2017”). Not only must “customer due diligence” (CDD) be carried out in relation to the person providing instructions but also, as is required by Regulation 28(10), the identity of the agent must be verified:
Where a person (“A”) purports to act on behalf of the customer, the relevant person must—
- verify that A is authorised to act on the customer’s behalf;
- identify A; and
- verify A’s identity on the basis of documents or information in either case obtained from a reliable source which is independent of both A and the customer.”
This does not mean that the identity of the person on whose behalf the instructions are being given is not relevant, and there is still the duty to the “identify the customer unless the identity of that customer is known to, and has been verified by, the relevant person” (Regulation 28(2)(a)) and the requirement to “assess, and where appropriate obtain information on, the purpose and intended nature of the business relationship or occasional transaction” required by Regulation 28(2)(c). This latter should be taken to include enquiring why the principal needs, or prefers, to be represented in this way and the source of any funds that they will introduce to the matter.
Aside from money laundering considerations there is also, at Paragraph 8.1 of the Code for Individuals a requirement that “you identify who you are acting for in relation to any matter”.
Client attributes, needs and circumstances
Jumping forward for a minute, because it is more logical to deal with this area at this point having already raised the issue of client competence, is the provision at Paragraph 3.4 of the Code of Conduct for Individuals and as part of Paragraph 4.2 of the Code for Firms, namely that “you consider and take account of your client’s attributes, needs and circumstances”.
This has clear echoes of Outcome O (1.5) of the 2011 Code although with the addition of the word “attributes” – a term that is not defined.
One cannot really consider this area without being aware of the SRA’s Ethics guidance in this area – “Representing people who lack mental capacity”. Indeed, you should really always bear in mind that on the whole the various items of Ethics guidance should always be considered since they are more than just advisory. Under “Status” the SRA say that “This guidance is to help you understand your obligations and how to comply with them. We may have regard to it when exercising our regulatory functions.” In other words, ignore the guidance at you peril.
Yes, it is true that “attributes, needs and circumstances” goes far wider than mere mental capacity but it is in the area of dealing with vulnerable clients that this provision will most frequently come into play. Indeed, mental capacity is seen by the SRA as being a very important issue and they recognise that it is one that “can be impacted by an illness or a disability. This includes situations where someone has a mental health problem, a learning disability, or a long-term condition like dementia.”
It is also something that has been highlighted in the various Risk Outlooks published by the SRA. The 2016-2017 version of this report addressed this issue as one of its priority risks as follows:
“If a person is vulnerable, poor service can have even more of a profound impact. There is no one definition of vulnerability. But examples include:
- people in a stressful situation where things like delay or poor communications could significantly add to their distress, for example, family law clients whose cases involve access to children,
- people who may be at risk of harm if mistakes or delay cause problems with their case, for example, asylum clients,
- people who require a third party to instruct a lawyer on their behalf, for example, acting as a power of attorney for a person who lacks capacity,
- people who may be less able to understand the law and their rights and fail to understand that something has gone wrong, for example, clients with learning or sensory disabilities, or who do not have English as a first language.”
The SRA’s Ethics guidance on the topic goes on to state that:
“Mental capacity can differ from person-to-person and it may not be immediately apparent if someone is experiencing problems…”
It is important that you are able to identify those prospective clients whom you feel may have reduced mental capacity when you are discussing their legal situation with them. Even if you believe someone has capacity to instruct you, you might still need to adjust elements of your services in order to:
- Take account of your client’s attributes, needs and circumstances (paragraph 3.4 of the Code of Conduct for Solicitors, RELs and RFLs); and
- Give clients information in a way they can understand so they can make informed decisions about the services they need and the options available to them (paragraph 8.6 of the Code of Conduct for Solicitors, RELs and RFLs).
You need, therefore, to give consideration to all facets of a client’s needs when taking instructions and to ensure that everyone within the firm is aware of what the relevant issues might be in this regard. Whilst it will not be the only factor to bear in mind, you should give thought to the implementation within the firm of a vulnerable clients policy. Whilst not a requirement of the Standards and Regulations, nor indeed of the current versions of Lexcel or CQS, nevertheless it should be seen as a useful contribution to the firm’s overall service and compliance profile. Before doing so you should carry out a risk assessment to enable you to identify client types or groups most at risk and then think about those specific measures that you need to put in place to address the concerns identified.
Depending on the work types undertaken by the firm, and the client groups that are dealt with, the factors to be borne in mind are likely to include mental capacity, physical disability and language barriers. With regard to the last of these always be alert to the dangers of relying on a relative or family friend to translate at a meeting with a client, particularly if it turns out that the translator has a position of influence over the client and potentially contrary interests.
In their Guidance, the SRA suggest that you should:
- Consider opportunities to talk to potential clients about mental capacity (although this is something that will have to be handled with extreme tact and caution)
- Ask all prospective clients from the outset (or the person who made the appointment on their behalf) whether they have any mental or physical impairments that you can help them with (again in as sensitive a way as you can).
- Clarify with clients when during the curse of the day they will find it easiest to think clearly and deal with matters.
- Offer to meet a prospective client in their home – being in familiar surroundings can help to reduce someone’s stress, anxiety and confusion, particularly for people with advanced conditions.
- Provide clear, non-technical written information to prospective clients about their legal issue before you meet with them
- Setting out the information you will need from them and the choices they will need to make can help people prepare for their meeting with you.
As we have already said, attributes, needs and circumstances goes far wider than merely issues of mental capacity. Issues such as age, experience, education, background, ethnicity and of course disability will have a bearing upon the extent to which a client will have differing needs of you in relation to the services provided. Have regard therefore to how you address the client, the complexity of the language you use, the reliance on cultural references, the assumptions you make as to prior knowledge and the client’s ability to grasp concepts which to you may seem simple but to them may be complex or alien to their experiences. You should also have regard to the recent research published by the SRA in conjunction with YouGov entitled “Reasonable adjustments in the provision of legal services” (https://www.sra.org.uk/sra/how-we-work/reports/reasonable-adjustments/) which looks at what you and your firm should be thinking about when adjusting the way you offer services to meet the needs of those with a disability. Suggestions here include:
- having an easy-to-navigate and accessible website, with a dedicated section for those with disabilities;
- promoting the fact you offer reasonable adjustments – this would increase the likelihood that a disabled person would choose to use your firm in the first place;
- including a photo of your office on your website to help potential visitors consider access issues before visiting you;
- highlighting if any of your colleagues have specific training in working with customers with disabilities, or if the firm has any accreditations or relationships with disability charities; and
- making sure all communications are as accessible as possible in terms of language, presentation and format – for example, use font of at least 14 point-size in all printed materials or letters.
Going back again, we now look at Paragraphs 3.2, 3.3 and 3.6 of the Code for Individuals and 3.1, 4.2 and 4.3 of the Code for Firms, all of which deal with issues of competence.
Paragraph 3.2 of the Code for Individuals and the first part of Paragraph 4.2 of the Code for Firms provides that “you ensure that the service you provide to clients is competent and delivered in a timely manner”. Paragraph 3.3 of the Code for Individuals places a personal duty upon you, the regulated individual, to ensure that “you maintain your competence to carry out your role and keep your professional knowledge and skills up to date” whilst Paragraph 4.3 of the Code for Firms requires that you, as a firm, “ensure that your managers and employees are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date”.
Quite why 3.6 “You ensure that the individuals you manage are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date” is separated from 3.2 by the supervision provisions is not immediately obvious but, it addresses issues of competence so we will look at it here rather than under the next topic of supervision. Likewise, Paragraph 3.1 of the Code for Firms is not necessarily in the obvious place with the provision that “you keep up to date with and follow the law and regulation governing the way you work” within a section dealing with co-operation and accountability.
All of these requirements look back, in the main, to Outcome O (1.4) of the 2011 Code “you have the resources, skills and procedures to carry out your clients’ instructions” and Outcome O (1.5) which required that “the service you provide to clients is competent, delivered in a timely manner”. They also bring into these regulations the provision previously to be found at Outcome O (7.6) “you train individuals working in the firm to maintain a level of competence appropriate to their work and level of responsibility”.
Looking first at Paragraph 3.2, the duty of competence is not just one of only doing work that you are able to do – it goes wider than that. It is about ensuring that you as an individual are able to work efficiently and have the ability to deal with a client’s matter “in a timely manner”. Thus, it is not just knowledge of the law, it is about having processes in place that allow for matters to be dealt with within agreed timescales. It is about being proactive in driving a matter forward and not always relying upon the client to remind you that they have not heard from you for some time. It is about having agreed processes so that matters are able to stick to a timetable and it is about being aware of deadlines and time-limits so that they are not missed or overlooked. This might require that the firm have a key-dates register or some other means for ensuring that key-dates are observed, or it might go far wider and require that the firm consider the use of some form of matter management software.
So far as Paragraph 3.3 is concerned, this is effectively a requirement that you undertake appropriate training. Training arrangements for solicitors underwent a major overhaul in 2017 with the replacement of the previous hours-based CPD regime with a less regimented structure of competence-based training requiring that everyone analysed the training they required, planned how they were to achieve it and then recorded the training undertaken and its overall contribution to their training needs plan. Whilst that revised basis has not entirely gone away, from a Codes point of view there is now the simple requirement that the individual lawyer maintain their competence so as to be able to carry out their role effectively, and that they must keep their professional knowledge and skills up to date. Much the same requirement is to be found under Regulation 3.1 of the Code for Firms to the effect that “you keep up to date with and follow the law and regulation governing the way you work”.
Where things become a little less certain in their application is in Paragraphs 4.2 and 4.3 of the Code for Firms.
Just to remind you, these two paragraphs state:
“4.2 You ensure that the service you provide to clients is competent and delivered in a timely manner…..
4.3 You ensure that your managers and employees are competent to carry out their role, and keep their professional knowledge and skills, as well as understanding of their legal, ethical and regulatory obligations, up to date.”
So far as 4.2 is concerned, this would appear to be placing on the firm as a whole a duty to ensure that those who are its constituent elements are competent to provide the services the firm offers – thus up to date with their legal knowledge (see also 3.1 of the Code for Firms) and working in an effective manner. 4.3, however, takes this a step further and places what is effectively a higher level of duty upon those who are managers within the firm (i.e. a sole principal in a recognised sole practice; a member of a LLP; a director of a company; a partner in a partnership; or in relation to any other body, a member of its governing body) requiring them to be able to be competent to carry out their role (presumably whether it is client-facing or not) and to have an awareness of ethical and regulatory issues – in other words to be trained in both what is required of a firm in terms of ethics as well as what is contained within the various regulatory requirements that affect the firm.
This is a whole new level of responsibility that is being laid at the door of the law firm manager. It means that, in theory anyway, they need to have an understanding of all regulatory obligations that could affect the firm. No longer can they hide behind the fact that they don’t have a specific management function or that someone else is responsible for money laundering, financial services, data protection, tax evasion and so forth. They, the manager, must understand their regulatory obligations.
Quite how practical an expectation this is remains to be seen – especially in large firms where the regulatory obligations that affect the firm as a whole may be quite complex and possibly beyond the remit of a manager not specifically involved in that area. We will have to see how the SRA interpret this going forward. The suspicion is that how this provision will be enforced will depend upon the circumstances. In the case of those managers who have wilfully turned their backs on important breaches of key regulation, then they may be called to account by the SRA in the event that a problem arises with the firm. However, those in well-managed firms where key responsibilities and are allocated to individuals who effectively manage those obligations and report back to their fellow managers in an appropriate manner are unlikely to be called to account.
Finally in this article we look at supervision.
Paragraph 3.5 of the Code for Individuals provides that:
Where you supervise or manage others providing legal services:
- you remain accountable for the work carried out through them; and
- you effectively supervise work being done for clients.
and Paragraph 4.4 of the Code for Firms provides
You have an effective system for supervising clients’ matters.
These are both very much cut down versions of what appeared in the 2011 Code – mostly in Chapter 7: Management of your Business – which dealt with, in some detail, the management and supervision of the firm. The fact that these provisions are so much shorter should not be seen as a reduction in their importance and, despite the SRA’s suggestion that the new Standards and Regulations should be seen as a fresh start, it might be worthwhile firms keeping a copy of Chapter 7 as a basis for achieving appropriate levels of management and supervision.
You would also do well to have regard to the provisions in Paragraph 2 of the Code for Firms – “Compliance and business systems” as these will also impact upon issues of supervision and accountability.
Thus, looking at Chapter 7 of the 2011 Code, you may wish to ensure that:
- you are able to identify, monitor and manage risks to compliance with the Principles and other provisions of the Standards and Regulations and take steps to address issues identified (Outcome O (7.3));
- train individuals working in the firm to maintain a level of competence appropriate to their work and level of responsibility (Outcome O (7.6));
- comply with the statutory requirements for the direction and supervision of reserved legal activities and immigration work (Outcome O (7.7));
- have a system for supervising clients’ matters, to include the regular checking of the quality of work by suitably competent and experienced people (Outcome O (7.8)); and
- not outsource reserved legal activities to a person who is not authorised to conduct such activities (Outcome O (7.9)).
This might translate into various specific supervisory tasks including:
- ensuring that incoming post is seen by a supervisor or a partner/director;
- reviewing work in progress on a monthly basis;
- if files are inactive, reviewing why that is the case;
- discussing work priorities;
- allowing those supervised the chance to discuss issues of concern whenever they arise;
- having personal development reviews with staff to ensure that they are growing their skill-set and keeping up to date with the law;
- holding regular departmental meetings; and
- re-allocating work that goes beyond the abilities of the person currently handling it.